On 3 May 2001, the Tasman Pioneer ran aground off the coast of Japan. The casualty was caused by the master's errors in sailing east of Biroushima in stormy conditions, where few lights were available, with no or only erratic radar coverage, and where the master gave an inappropriate command to turn the ship to port.

Rimba Shipping Co Ltd time chartered the Tasman Pioneer to Tasman Orient Line (Cyprus) Ltd, who sub-time chartered it to Tasman Orient Line CV (the plaintiff). The Tasman Pioneer was carrying cargo under bills of lading issued by the plaintiff.

The grounding resulted in substantial damage to the cargo. The plaintiff received cargo claims exceeding USD 11 million. The plaintiff sought a declaration to limit its liability for cargo claims to about NZD 7 million calculated according to tonnage under Pt VII of the Maritime Transport Act 1994.

Alliance Group Ltd and Comalco New Zealand Ltd (the defendants) sought an order requiring the plaintiff to establish a limitation fund by paying the Registrar the amount determined under Pt VII. The plaintiff opposed the defendants' application.

Held: Decree of limitation of liability granted. The defendants' application to establish a limitation fund by way of security is dismissed as there is no jurisdiction to order accordingly.

The Maritime Transport Act 1994 entitles the owners of a ship to claim limitation of liability (s 85). The definition of an 'owner' includes the charterer in any case where the ship had been chartered (s 84).

The plaintiff was a sub-time charterer, and thus an 'owner' for limitation under s 85.

The definition of 'owner' in s 84 and reference to 'owner' in s 85 should not be read down to exclude a time charterer or a sub-time charterer. Tonnage limitation has been available to charterers for nearly a century in England, New Zealand, and under the LLMC.

Limitation of liability in maritime claims has a lengthy but controversial history. The rationale for limiting liability in maritime claims is the 'public policy in encouraging shipping and trade which overrides the competing public policy in compensating the victims of wrongdoing' (Nigel Meeson, Admiralty Jurisdiction and Practice (2nd edn, 2000) para 8-001, p 241).

The origins of s 85 of the Maritime Transport Act 1994 can be traced to the earliest legislative provisions on limitation of liability in maritime claims contained in the Merchant Shipping Act 1894 (UK), the Shipping and Seamen Act 1903 and the Shipping and Seamen Act 1908. These provisions restricted the entitlement for limitation to owners.

The Shipping and Seamen Amendment Act 1909 extended the entitlement to include charterers to whom the ship was demised within the term 'owner', reflecting s 71 of the UK Merchant Shipping Act 1906 (see also CMA CGA SA v Classica Shipping Co Ltd [2003] 2 Lloyd's Rep 50 [17] (Steel J) (CMI728); Sir John Jackson Ltd v Owners of the Steamship 'Blanche' (The 'Hopper No 66') [1908] AC 126, 130, 136).

The LLMC 1924 extended limitation to persons who 'operate the vessel without owning it or the principal charterer'. The LLMC 1924 and s 1 of the UK Merchant Shipping Act 1921 resulted in s 458(2) of the Shipping and Seamen Act 1952, which extended the definition of 'owner' to 'charterer or other person for the time being' responsible for the vessel if the owner was not so responsible (see also CMA CGA SA [31]-[35] (Steel J); Aegean Sea Traders Corporation v Repsol Petroleo SA (The 'Aegean Sea') [1998] 2 Lloyd's Rep 39, 48).

The Shipping and Seamen Amendment Act 1987 extended the definition of 'owner' of ships under 'charter or demise' to the charterer if the owner was not responsible for navigation (s 2), following art 6.2 of the LLMC 1957 which entitles charterers to limitation.

Section 85 of the Maritime Transport Act 1994 was based on art 1 of the LLMC 1976. Article 1 defined those entitled to limit as 'shipowners', extended to mean 'owner, charterer, manager or operator'. Article 4 of the LLMC 1976 reads:

A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.

Section 85(2) of the Maritime Transport Act 1994 paraphrased art 4 of the LLMC 1976, and provides:

Subject to subsection (2) of this section, the following persons are entitled to limit their liability in accordance with this Part of this Act:

1. Owners of ships, and any master, seafarer, or other person for whose act, omission, neglect, or default the owner of the ship is responsible; ...

Under the LLMC 1957, a shipowner lost the right to limit if guilty of 'actual fault or privity' (art 1). Under either the LLMC 1976 or s 85, the liability claimant seeking to break the limitation must show that the person claiming limitation knew that loss would result (see David Jackson, Enforcement of Maritime Claims (3rd edn, 2000) para 24.51, p 590).

Section 85(2) did not operate to defeat the plaintiff's claim to be entitled to a decree limiting its liability. The casualty did not result from either the plaintiff's personal act or omission or where the plaintiff intended to cause the loss or acted recklessly in the knowledge that loss or damage would probably result. While it may have been caused by the negligent navigation of the master, his actions were not attributable to the plaintiff.

The wording in art 4 of the LLMC 1976 and s 85 of the Maritime Transport Act 1994 has comparisons in other maritime Conventions, including the Hague-Visby Rules (see Browner International Ltd v Monarch Shipping Co Ltd (The 'European Enterprise') [1989] 2 Lloyd's Rep 182, 191-192 (Steyn J)) and the Athens Convention 1974 (see R G Mayor (t/a Granville Coaches) v P&O Ferries Ltd (The 'Lion') [1990] 2 Lloyd's Rep 144, 149-150 (Hobhouse J)). However, Nicholas Gaskell, Regina Asariotis and Yvonne Baatz, Bills of Lading: Law and Contracts (Informa Law from Routledge, 2000) para 16.53, pp 520-521 note:

There are subtle differences, as well as similarities, between the tests in the various Conventions and care has to be taken in comparing them. First, the wording of the Article would clearly indicate that the burden of proof under the Hague-Visby Rules will be on the cargo owner to show that the carrier was guilty of the necessary misconduct. Secondly, the test will be fairly hard to satisfy because of the subjective requirement arising through the link between recklessness and knowledge of consequences. Whatever the exact meaning of recklessness, it is its combination with a certain state of knowledge on the part of the carrier that will cause problems for the cargo owner. Moreover, the carrier has to have knowledge that 'damage' would probably, and not possibly, result.

In Nelson Pine Industries Ltd v Seatrans New Zealand Ltd (The 'Pembroke') [1995] 2 Lloyd's Rep 290, Ellis J suggested, in obiter dicta, that the master's reckless stowing of machinery on board could be attributed to the carrier under the Hague-Visby Rules. The Court declined to follow this decision.

Section 86(2) roughly reflects the list of claims excepted from limitation in art 3 of the LLMC 1976. If the Ministry's intention was to incorporate the effect of art 3 into New Zealand law, there ought to have been a discussion in Parliament as to whether the LLMC 1976 division between claims subject to limitation and those excepted from limitation was appropriate in the New Zealand context.

There was no ground to conclude that the reference to s 86(2) was an obvious drafting error for s 86. Although Courts have the power to correct obvious drafting errors in statutes, they proceed with great caution so as not to cross the line between interpreting Parliament's intention and engaging in judicial legislation (see Inco Europe Ltd v First Choice Distribution (a firm) [2000] 2 All ER 109, 115 (Lord Nicholls)).